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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

NETRATINGS, INC.
(Exact name of Registrant as specified in its charter)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        The number of shares of the Registrant's Common Stock outstanding as of April 30, 2003, was 33,730,718.

NETRATINGS, INC.

FORM 10-Q INDEX

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PART I.    FINANCIAL INFORMATION

ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NETRATINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

See accompanying notes to the condensed consolidated financial statements.

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NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

See accompanying notes to the condensed consolidated financial statements.

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NETRATINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

See accompanying notes to the condensed consolidated financial statements

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NETRATINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.     BASIS OF PRESENTATION

        The accompanying unaudited condensed consolidated financial statements of NetRatings, Inc. (NetRatings or the Company) have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in NetRatings' annual report on Form 10-K for the fiscal year ended December 31, 2002.

        The financial information included herein reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the results for the interim period. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

2.     COMPREHENSIVE LOSS

        The components of comprehensive loss are as follows (in thousands):

3.     SHAREHOLDERS' EQUITY

        The calculation of basic and diluted net loss per share is as follows (in thousands, except per share data):

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        In December 2002, the FASB issued SFAS 148—"Accounting for Stock-Based Compensation—Transition and Disclosure." SFAS 148 amends SFAS 123—"Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair-value method for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for annual and interim financial statements issued after December 15, 2002. As allowed by FAS 123, the Company follows the disclosure requirements only of FAS 123, but continues to account for its employee stock option plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," which results in no charge to earnings when options are issued at fair market value. Pro forma information presented below regarding net loss required under SFAS No. 123 has been determined as if the Company had accounted for its stock options under the fair value method of SFAS No. 123. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's GAAP and pro forma information follows (in thousands, except per share data):

4.     GOODWILL AND INTANGIBLE ASSETS

        The Company will reassess the carrying value of its goodwill and intangible assets each year as of October 1, unless indicators of impairment become apparent earlier.

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        Goodwill and other intangible assets along with their weighted average lives as of March 31, 2003, consisted of the following (in thousands, except average life):

        Based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: $3.9 million in 2003, $3.1 million in 2004, $2.1 million in 2005 and $1.7 million in 2006 and 2007.

5.     RESTRUCTURING EXPENSES

        In the first quarter of 2002, NetRatings' management approved and initiated a restructuring plan intended to streamline its business to focus on core products, refine its product line, and consolidate space at its Milpitas facility. The restructuring plan has resulted in a reduction of 15% of NetRatings' workforce. Accordingly, NetRatings recognized a restructuring charge of approximately $6,969,000 during the first quarter of 2002. The restructuring plan involved the termination of 40 employees worldwide, all of which have been terminated. Positions were eliminated primarily in NetRatings' executive management, engineering, and sales functions.

        In connection with the acquisitions completed in 2002 and the MMXI Switzerland transaction in the first quarter of 2003, NetRatings incurred an additional $6,934,000 in restructuring liabilities that have been accounted for as additional purchase price. The restructuring plans involve the termination of 96 employees worldwide, 75 of which have been terminated as of March 31, 2003. Positions were eliminated primarily in the executive management, general and administration, engineering, and sales functions.

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        The following table summarizes activity associated with the restructuring plan as of March 31, 2003:

6.     ACQUISITIONS

        In addition to the acquisitions completed in 2002, NetRatings acquired beneficial ownership of approximately 80% of MMXI Switzerland in the first quarter of 2003. MMXI Switzerland is a Swiss company whose business is focused in the international Internet media and market research industries. The impact of this acquisition on NetRatings' consolidated results of operations is not significant and therefore the Company does not include pro forma results for this acquisition.

        NetRatings accounts for its acquisitions under the purchase method. The allocation of purchase price related to the acquisitions reflects the fair value adjustments to their assets and liabilities based on independent appraisals. The results of operations of each acquired entity are reflected in the consolidated results of operations beginning on their respective acquisition dates.

7.     INDUSTRY SEGMENT AND FOREIGN OPERATIONS

        NetRatings operates in one segment for providing media and market research focused on Internet audience behavior and activity. For geographical reporting, revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist primarily of property and equipment and are attributed to the geographic location in which they are located.

        During the three months ended March 31, 2003, revenues of $6,121,000 were attributed to the United States and $2,900,000 were attributable to NetRatings' international operations. During the first quarter of 2003, net losses, including allocation of expenses, were $4,425,000 and $760,000 for U.S. and international operations, respectively. At March 31, 2003, $2,428,000 of NetRatings property and equipment were located in the United States and $421,000 was located in Europe. There were no corresponding amounts in the first quarter of 2002 since the acquisitions of foreign operations occurred in the second and third quarters of 2002.

8.     RECENT ACCOUNTING PRONOUNCEMENTS

        In June 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations" (SFAS 143). Under these rules, a liability for a long-lived asset retirement obligation should be recognized in the period in which it is incurred and should be initially measured at its fair value.

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SFAS 143 is required to be implemented for fiscal years beginning after June 15, 2002. The adoption of SFAS 143 did not have a material impact on the Company's consolidated financial statements.

        In June 2002, the FASB issued SFAS 146—"Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 requires recording costs associated with exit or disposal activities at fair value when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. The requirements of SFAS 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS 146 did not have a material effect on the Company's financial position, results of operations, or cash flows.

        In November 2002, the FASB issued FASB Interpretation No. 45—"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 are effective for any guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material effect on the Company's financial position, results of operations, or cash flows.

        In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect the adoption of FIN 46 to have a material effect on its financial position, results of operations, or cash flows.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

        Some of the statements contained in this Form 10-Q (this "Report") are forward-looking statements, including but not limited to those specifically identified as such, that involve risks and uncertainties. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. These statements are based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Important factors that may cause actual results to differ from expectations include those discussed elsewhere in this Report on Form 10-Q under the heading "Risk Factors That May Affect Our Performance."

Overview

        We are a leading provider of Internet audience measurement and analysis in the United States and around the world. All of our products and services are designed to assist companies in making critical business decisions regarding their Internet strategies and initiatives. We have a highly diversified and global client base, including large and small companies in the media, technology, advertising, financial services, consumer products, retail, and travel industries. As of March 31, 2003, we had approximately 660 clients. In 1998 and 1999, we formed strategic relationships with Nielsen Media Research, the leading source of television audience measurement and related services in the United States, and ACNielsen, a leading global provider of market research information and analysis. We believe that our strategic relationships with Nielsen Media Research and ACNielsen provide us with a unique opportunity to leverage their brands, expertise and industry relationships to facilitate the rapid acceptance and deployment of our diverse portfolio of products and services.

        During 2002, following the mutual termination of an Agreement and Plan of Merger with Jupiter Media Metrix, Inc., we completed a number of acquisitions that expanded our portfolio of products and services in the United States and abroad. On April 9, 2002, we acquired substantially all the assets of the AdRelevance online advertising expenditure measurement division of Jupiter Media Metrix Inc. for $8.3 million in cash. The assets acquired include the AdRelevance suite of services and related patent applications, trademarks, and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

        On May 6, 2002, we acquired substantially all the assets related to DoubleClick's @Plan unit for $18.1 million in cash and stock. The assets acquired include the @Plan suite of services and related trademarks and copyrights, associated contracts, accounts receivable balances, and related deferred revenue balances.

        On May 7, 2002, we acquired, from ACNielsen Corporation, the remaining 80.1% interest in ACNielsen eRatings.com that we did not already own for $9.1 million in stock. Separately on May 7, 2002, we acquired selected assets from Jupiter Media Metrix related to their European Internet audience measurement services for $2 million in cash, allowing us to further expand our global customer base. Also on May 7, 2002, we and Jupiter Media Metrix entered into a settlement agreement under which Jupiter Media Metrix agreed to dismiss with prejudice the patent infringement action it filed against us in March 2001. As part of the settlement agreement, we paid Jupiter Media Metrix

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$15 million in cash and acquired from Jupiter Media Metrix its patents for computer use tracking (United States Patent Nos. 6,115,680 and 5,675,510), related patent applications and all patents issuing from such applications, and related materials.

        On August 5, 2002, we announced the acquisition of 52% of NetValue's outstanding common stock, which was completed on August 9, 2002 through direct purchases from certain NetValue stockholders for a price of two Euros per NetValue share. On August 12, 2002, NetValue's board was reconstituted to provide NetRatings with majority control of NetValue's board. NetValue is a French company traded on the "Nouveau Marche" of the Euronext Paris exchange whose business is focused in the international Internet media and market research industries. In exchange for 52% of NetValue's outstanding common stock, we paid $7.1 million in cash and issued 266,000 shares of our common stock to certain NetValue common stockholders. On October 7, 2002, we commenced a simplified all-cash take-over bid to acquire the outstanding shares of NetValue that we did not already own for a price of two Euros per NetValue share. On November 4, 2002, the Conseil des Marches Financier, Paris, France, issued a statement announcing that we had acquired 2,858,000 shares of NetValue in the simplified all-cash take-over bid, which ended on October 28, 2002. As of December 31, 2002, we owned 8,011,000 shares of NetValue, representing approximately 86% of the capital and 87.5% of the voting rights of NetValue.

        In January 2003, we acquired beneficial ownership of approximately 80% of MMXI Switzerland, a Swiss company whose business is focused in the international Internet media and market research industries.

        We currently offer our products and services in thirteen locations around the world. During 2002, we discontinued operations in a number of international markets that were not viewed by us as critical markets. In France, Japan, and Brazil, our products and services are sold through joint ventures. As of March 31, 2003, we held a 50% ownership interest in Mediametrie eRatings.com, our French joint venture, and the remaining ownership interest was held by Mediametrie. As of March 31, 2003, we held an ownership interest in NetRatings Japan, our Japanese joint venture, of approximately 49%, and the remaining ownership interest was held by TransCosmos and other investors. In April 2003, we increased our ownership interest in NetRatings Japan from approximately 49% to approximately 58%. As of March 31, 2003, we held a 49% ownership interest in Ibope eRatings.com, and the remaining ownership interest was held by Ibope. Revenue from our joint ventures' Internet audience measurement services are allocated between NetRatings and the joint ventures depending on the location of the customer and the location of the panel whose data is used in the service. We use the equity method to account for our joint ventures.

        We generate revenues primarily from the sale of our Internet audience measurement products and services. Our products and services include both syndicated products and customized products. We primarily sell our syndicated products and services on an annual subscription basis and bill our clients in advance, typically on an annual or quarterly basis. We recognize revenue from the sale of our syndicated products and services ratably over the term of the subscription agreement. Prepaid subscription fees are recorded as deferred revenue until earned. Revenue from customized products and services is recognized in the period in which the product or service is provided. Therefore a significant portion of revenue recognized in any period results from the amortization of deferred revenue balances. We also derive a portion of our revenue from royalty payments from our joint venture partners.

        We have a limited operating history upon which investors may evaluate our business prospects. We have incurred net losses since our inception, and as of March 31, 2003, our accumulated deficit was $99.5 million. We expect to continue to invest in enhancing our products and service offerings, including investment in our MegaPanel service. As a result, we expect to continue to incur net losses for the foreseeable future.

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Critical Accounting Policies and Estimates

        Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, our management evaluates its estimates and judgments, including those related to bad debts, investments, income taxes, financing operations, contingencies, and litigation. Our management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the result of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        Our management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its financial statements:

Revenue Recognition

        We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (4) is based on management's judgment regarding the collectibility of those fees. We primarily sell these products and services pursuant to one-year subscription agreements and bill our customers in advance, typically on a quarterly or annual basis. We recognize revenue from the sale of our information and analytical products and services ratably over the term of the subscription agreement. Prepaid subscription fees are recorded as deferred revenue until earned. If a contract's collectibility comes into question, revenue recognition is discontinued until collectibility is reasonably assured. This determination is based on our management's judgment and could adversely affect both revenue and deferred revenue.

Bad Debt

        We maintain allowances for doubtful accounts for estimated losses resulting from the inability of customers to make contractually required payments. If the financial conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required and such allowances are based on management's judgment.

Legal Contingencies

        We are currently involved in certain legal proceedings. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses, in accordance with FAS 5. A determination of the amount of reserves required, if any, for these contingencies are made after careful analysis of each individual case. We do not believe the outcomes to these matters will have a material adverse effect on our financial position. Nonetheless, it is possible that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategy related to these proceedings.

Goodwill and Intangible Assets

        We recorded goodwill and intangible assets during 2002 and 2003 in connection with our acquisitions. Those intangible assets not deemed to have an indefinite life are amortized over their

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estimated useful lives, which range from 1 to 13 years. In accordance with SFAS No. 142, goodwill and indefinite-lived intangibles are not amortized, but are reviewed at least annually for impairment. We performed our annual evaluation of goodwill and intangibles as of December 1, 2002 and no impairment was indicated. We will reassess the carrying value of goodwill and intangible assets each year as of October 1, unless indicators of impairment become apparent earlier.

Investments

        We hold minority interests in companies having operations or technology in areas within or adjacent to our strategic focus. These entities, which are accounted for on the equity method, are non-publicly traded companies whose value is difficult to determine. We reduce our investment in accordance with our equity in each joint venture's loss and record a corresponding loss on joint ventures in our statement of operations. The equity basis is adjusted for any additional capital contributions or commitments. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments and such amounts that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

Results of Operations

        The following table sets forth certain financial data as a percentage of revenue for the quarters indicated:

        Revenue.    We generate revenue primarily from the sale of our Internet audience measurement products and services. We typically sell these services pursuant to one-year subscription agreements and bill our customers in advance, usually on an annual or quarterly basis. We also derive a portion of our revenue from our joint venture partners.

        Revenue increased 109% to $9.0 million for the quarter ended March 31, 2003, compared to $4.3 million for the corresponding period in 2002. The increase in revenue was primarily due to the acquisitions during the second and third quarters of 2002. As of March 31, 2003, approximately 660 customers worldwide subscribed to our products and services. Our global contract renewal rate was

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72% for the first quarter of 2003 compared with a 61% renewal rate for the first quarter of 2002. Our global average sales price was $63,000 for the first quarter of 2003 compared with $50,000 for the first quarter of 2002. During the quarter ended March 31, 2003, no customer accounted for more than 10% of our revenue.

        Cost of Revenue.    Cost of revenue consists primarily of expenses related to the recruitment, maintenance, and support of our Internet audience measurement panels, which are expensed as they are incurred. Cost of revenue also includes data collection costs for our products and services and operational costs related to our data center. Accordingly, such expenses are not matched with any revenue or subscriptions generated in a given period and are higher in periods in which we are involved in significant panel development activities. Also included in cost of revenue are the data acquisition costs related to our joint ventures, which are recognized ratably over the term of the customer's subscription agreement, as the data is provided, as well as the royalty fees associated with certain data partnering agreements.

        Cost of revenue increased 57% to $4.2 million, or 47% of revenue, for the quarter ended March 31, 2003 from $2.7 million, or 62% of revenue, for the three-month ended March 31, 2002. Cost of revenue increased in dollars due to (i) the expansion of our data center primarily related to the acquisition of AdRelevance in the second quarter of 2002; (ii) expenses related to the third party generated surveys related to the @Plan product also acquired during the second quarter of 2002; and (iii) the international panel expenses related to the acquisitions of eRatings and NetValue during the second and third quarters of 2002. These increases were partially offset by a reduction in strategic partner royalty expenses related to the discontinuation of AdSpectrum and eCommercepulse in the first quarter of 2002 and a reduction in panel fees associated with both the U.S. home and at-work panels as recruiting efforts decreased.

        In February 2003, we announced our intention to launch a MegaPanel service in the United States and to expand the service internationally, which will require significant investment in recruitment and panel related costs during 2003.

        Research and Development.    Research and development expenses consist primarily of compensation and related costs for personnel associated with our research and product development activities. These costs are expensed as incurred. Research and development expenses increased 52% to $2.1 million for the quarter ended March 31, 2003 from $1.4 million for the comparable period in 2002. Research and development expenses represented 24% and 32% of revenue for the quarters ended March 31, 2003 and 2002, respectively. The increase was primarily due to increased research and development personnel and associated payroll expenses resulting from our acquisitions in the second and third quarters of 2002, partially offset by our reduction in workforce in the first quarter of 2002.

        Sales and Marketing.    Sales and marketing expenses consist primarily of salaries, benefits, and commissions to our salespeople and analysts, as well as costs related to seminars, promotional materials, public relations, advertising, and other sales and marketing programs. Sales and marketing expenses increased 34% to $3.7 million for the quarter ended March 31, 2003 from $2.8 million for the comparable period in 2002. Sales and marketing expenses represented 41% and 64% of revenue for the quarters ended March 31, 2003 and 2002, respectively. The increase was primarily related to an increase in salary-related expenses resulting from our acquisitions in the second and third quarters of 2002, partially offset by a reduction in public relations and trade show expenses during the first quarter of 2003.

        General and Administrative.    General and administrative expenses consist primarily of salaries and related costs for executive management, finance, accounting, human resources, legal, information technology, and other administrative personnel, in addition to professional fees and other general corporate expenses. General and administrative expenses increased 87% to $2.2 million for the quarter

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ended March 31, 2003 from $1.2 million for the comparable period in 2002. General and administrative expenses represented 25% and 28% of revenue for the quarters ended March 31, 2003 and 2002, respectively. The increase in absolute dollars was primarily related to higher payroll, travel and related expenses due to the acquisition of the international operations in the second quarter of 2002.

        Restructuring and Other Expenses.    During the first quarter of 2002, we incurred a charge of $7.0 million related to our restructuring plan to streamline our business to focus on core products, refine our product line and consolidate space at our Milpitas, California facility. This plan also included a 15% reduction in workforce. There were no corresponding charges in the first quarter of 2003.

        Acquisition-related Expenses. &n